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Value Investing with Austrian Economic principalsTue, 14 Aug 2018 21:24:26 +0000en-UShourly1https://wordpress.org/?v=4.9.8Investing Matters provides alternative financial views in investing ideas and educate people on applying Value Investing and Austrian Economic principles to investing, instead of trusting their financial adviser. David da Silva will be giving his thoughts on wealth preservation on current market conditions.David da Silva: Investor on the JSE Stock ExchangecleanDavid da Silva: Investor on the JSE Stock Exchangedavid@investingmatters.co.zadavid@investingmatters.co.za (David da Silva: Investor on the JSE Stock Exchange)Alternative financial views in investing ideas and educate people on applying Value Investing with Austrian Economic principles to investing.Investing Mattershttp://investingmatters.co.za/wp-content/uploads/2016/08/Investing-Matters-Logo-Media.pnghttps://investingmatters.co.za
Monthly115832825Trump Has "Great Deal Of Frustration" With Erdogan As White House Warns More Sanctions Cominghttps://investingmatters.co.za/trump-has-great-deal-of-frustration-with-erdogan-as-white-house-warns-more-sanctions-coming/#utm_source=rss&utm_medium=rss&utm_campaign=trump-has-great-deal-of-frustration-with-erdogan-as-white-house-warns-more-sanctions-coming
https://investingmatters.co.za/trump-has-great-deal-of-frustration-with-erdogan-as-white-house-warns-more-sanctions-coming/#respondTue, 14 Aug 2018 21:24:26 +0000https://investingmatters.co.za/trump-has-great-deal-of-frustration-with-erdogan-as-white-house-warns-more-sanctions-coming/President Donald Trump “has a great deal of frustration,” with Turkish President Recep Tayyip Erdogan, White House press secretary Sarah Huckabee Sanders said at a briefing Tuesday, calling again on the Turkish “executive president” to release pastor Brunson and other U.S. citizens as the diplomatic standoff between the two nations continued to weigh on global markets. “We’re going… Read More

]]>President Donald Trump “has a great deal of frustration,” with Turkish President Recep Tayyip Erdogan, White House press secretary Sarah Huckabee Sanders said at a briefing Tuesday, calling again on the Turkish “executive president” to release pastor Brunson and other U.S. citizens as the diplomatic standoff between the two nations continued to weigh on global markets.

“We’re going to continue to call on Turkey to do the right thing and release those individuals,” including pastor Andrew Brunson, Sanders said.

The statement came shortly after a White House official said that the United States warned more economic pressures may be in store for Turkey if it refuses to release the jailed American pastor. The message emerged a day after White House national security adviser John Bolton met privately with Turkish ambassador Serdar Kilic about the case of evangelical pastor Andrew Brunson. Bolton warned him that the United States would not give any ground, a senior U.S. official said.

The White House official, speaking to Reuters on condition of anonymity, said “nothing has progressed” thus far on the Brunson case.

“The administration is going to stay extremely firm on this. The president is 100 percent committed to bringing Pastor Brunson home and if we do not see actions in the next few days or a week there could be further actions taken,” the official said.

Further actions would likely take the form of economic sanctions, the official said, who added: The pressure is going to keep up if we’re not seeing results.

Trump doubled tariffs on imports of Turkish steel and aluminum last week, contributing to a precipitous fall in the lira which has lost a quarter of its value this month. The United States is also considering a fine against Turkeys state-owned Halkbank for allegedly helping Iran evade U.S. sanctions. Earlier this month, the United States imposed sanctions on two top officials in President Recep Tayyip Erdogans cabinet in an attempt to get Turkey to turn over Brunson.

In response, on Tuesday Erdogan vowed to boycott American electronics, including iPhones, in a defiance of Trump’s demands. And while even a widespread Turkish boycott would do little to dent U.S. economic interests, it shows Erdogan is refusing to give in to market turmoil that’s pushed borrowing costs to record highs and threatens to descend the nation into a financial crisis.

Surprisingly, despite the now daily tit-for-tat escalation between Ankara and Washington as diplomatic tensions rage, the Turkish Lira rallied for the first time in a week as Turks cashed in dollar savings to take advantage of the huge slump in the local currency. As the FT reported, speculation has grown that Turkish policy makers will heed calls from corporate and banking executives to raise interest rates to stem the rout.

]]>https://investingmatters.co.za/trump-has-great-deal-of-frustration-with-erdogan-as-white-house-warns-more-sanctions-coming/feed/0167180The Emerging Market Contagion Flowcharthttps://investingmatters.co.za/the-emerging-market-contagion-flowchart/#utm_source=rss&utm_medium=rss&utm_campaign=the-emerging-market-contagion-flowchart
https://investingmatters.co.za/the-emerging-market-contagion-flowchart/#respondTue, 14 Aug 2018 21:05:00 +0000https://investingmatters.co.za/the-emerging-market-contagion-flowchart/There is a striking pattern of regularity how every time the dollar spikes, or sufficient high level, emerging market contagion usually follows. Yes, of course, “each time is different”, and frequently there are idiosyncratic factors but for the most part, the one precipitating factor to turmoil in emerging markets (at first, as it then spreads… Read More

]]>There is a striking pattern of regularity how every time the dollar spikes, or sufficient high level, emerging market contagion usually follows.

Yes, of course, “each time is different”, and frequently there are idiosyncratic factors but for the most part, the one precipitating factor to turmoil in emerging markets (at first, as it then spreads to developed markets), is a sharp increase in the value of the US dollar.

For reads who missed it the first time, now that emerging markets are once again breaking down – and not just across a few nations but across the globe – it is worth recalling what Deutsche Bank’s Aleksandar Kocic said three months ago, namely that the “USD is emerging as the key variable — it presents a compact summary of the underlying macro risks that could destabilize the current Fed path.” In other words, the last thing the Fed wants right now as it accelerates its balance sheet normalization, is a sharp spike in the dollar. And yet, that’s precisely what is happening. Kocic explains:

A strong USD corresponds to generally hawkish Fed in an environment where the US is recovering fast while the rest of the globe is still too slow or recessionary, or that the Fed is pushing rates above the neutral and causing excessive tightening of financial conditions and potentially triggering recession. A weak USD path, on the other hand, can materialize either as an inflation or credit (twin deficits) risk, a troubling possibility to which there is no adequate policy response.

For Kocic, the relative strength of the dollar was the exogenous event that could awake markets from their peaceful slumber, resulting in a violent reassessment of monetary conditions as the Fed quietly undoes the biggest monetary experiment in history, or as he puts it, “although unwind of stimulus and Fed exit continue without disrupting the markets, the underlying stability remains local, threatened potentially by the tail risk.”

How does this look schematically?

Conveniently, now that EM contagion is all the rage again, the Deutsche Banker came up with a handy flowchart showing the next steps in how the stronger dollar could lead – and is leading – to an “explosive” move in not only the front end of the curve, but across all markets:

Causality chain of strong USD and its potential knock-on effect is shown in the chart. We start at the lower left corner. Fed hikes and strong USD open up the EM dilemma: Facing the outflows or defending the currency at expense of stifling the growth. This implies both, more volatility and potential sell off in EM, and bearish pressure on the long end of the UST that would offset the underlying bid for US bonds (strong USD is bullish). Turbulence in EM could have a knock-on effect on risk assets in the US.

Why is the above critical? Because as Kocic wrote in May long before the sharp plunge in the Chinese yuan, if the cycle were to play out, it would result in the same set of conditions which led to a global bear market back in 2015 in the aftermath of China’s devaluation.

Well, here we are, and events are playing out precisely as they did three years ago, with two key catalysts: a stronger US Dollar, and a sliding Chinese Yuan.

The punchline: the recent dollar surge, which started on April 17, catalyzed by the first (of many) PBOC RRR cuts, has launched a feedback loop which, very much like the Chinese 2015 devaluation, culminates in a very unpleasant – for the Fed – outcome: a collapse in EMs should dollar strength not be arrested, which then morphs into a broad-based liquidation of all risk assets, unless of course the Fed relents and ends its tightening cycle prematurely.

And with all the out of the way, here is what the strong dollar-emerging market contagion flowchart looks like.

]]>https://investingmatters.co.za/the-emerging-market-contagion-flowchart/feed/0167181China’s Plan to Tank Their Own Stock Markethttps://investingmatters.co.za/chinas-plan-to-tank-their-own-stock-market/#utm_source=rss&utm_medium=rss&utm_campaign=chinas-plan-to-tank-their-own-stock-market
https://investingmatters.co.za/chinas-plan-to-tank-their-own-stock-market/#respondTue, 14 Aug 2018 20:55:56 +0000https://investingmatters.co.za/chinas-plan-to-tank-their-own-stock-market/This post China’s Plan to Tank Their Own Stock Market appeared first on Daily Reckoning. When I say the fix is in for FXI that’s not meant to be mysterious. FXI is the ticker symbol for a U.S. exchange-traded fund (ETF) composed of the largest Chinese stocks. The phrase “the fix is in” simply refers… Read More

When I say the fix is in for FXI that’s not meant to be mysterious. FXI is the ticker symbol for a U.S. exchange-traded fund (ETF) composed of the largest Chinese stocks.

The phrase “the fix is in” simply refers to government-backed manipulation. When you combine the two into a government plan to tank their own stock market, at least to a point, you’re as close to a sure thing as stock market indexes allow these days. That’s exactly what’s going on in China right now.

A currency devaluation will likely lead to a stock market collapse, but it’s a trade-off China is willing to accept because a cheaper currency will stimulate exports and support jobs.

China’s motives in market manipulation are about social stability more than profit and loss. Of course, the Chinese have nothing against making money; they’re good at it. But China is controlled by a Communist Party dictatorship that is most concerned about its self-perpetuation.

That self-perpetuation can involve prison camps, thought control and torture if needed, but on a day-to-day basis it’s more likely to involve avoidance of inflation, unemployment and market panics (versus slow, steady declines).

Investors with vague or no recollection of the 1989 Tiananmen Square protest and massacre in Beijing have been taught to recall the event as a “pro-democracy” student rally complete with a 33-foot-tall papier-mâché statue called the Goddess of Democracy that was destroyed as the military cleared the square. That’s a highly selective and misleading portrait of the overall protest.

It’s true that student demonstrators placed demands for more freedom of the press and freedom of speech in their petitions. Yet the origins of the protest were economic. Rapid economic growth in the 1980s had resulted in large gains for some but had marginalized and disgruntled many others.

Inflation was a real tax on those with limited resources and an easily avoided inconvenience for the rich. It was these economic grievances — inequality and inflation — that gave rise to the protests. The pro-democracy aspects were tacked on in the later stages as the crowds grew.

Initially the Communist Party leadership was divided between moderates, like Zhao Ziyang, who favored some dialogue with the protesters, and hard-liners, like de facto leader Deng Xiaoping, who favored a forced breakup of the protest and the arrest of its leaders.

In the end, the hard-liners got the upper hand and the result was a violent military attack on the demonstration. Death estimates vary widely and cannot be verified but range from 1,000 to 10,000 dead protesters. Communist Party leadership itself was thrown into chaos in the aftermath of Tiananmen with Zhao Ziyang being purged and Jiang Zemin being installed as the new hard-line party leader.

This statue, located at the University of British Columbia in Vancouver, is a replica of the Goddess of Democracy first displayed during the Beijing Tiananmen Square protests in April–June 1989.

The ghosts of Tiananmen still haunt the Communist Party leadership almost 30 years later. Economic warfare between China and its trading counterparties is not mainly about economics. It’s mainly about social stability in China, which means avoidance of new mass protests and suppression of widely voiced political dissent.

This econo-political history brings us to the ongoing trade war between China and the U.S. A superficial account of the trade war says it was started by President Trump last winter with his imposition of tariffs on Chinese (and other) goods imported into the U.S. including steel, aluminum and certain appliances.

China retaliated with tariffs on U.S. imports. Trump doubled down with U.S. tariffs on a much longer list of Chinese goods and imposed penalties for Chinese theft of U.S. intellectual property.

China retaliated again, and Trump doubled down again. These tit-for-tat tariffs were rising in $10 billion bumps. Suddenly the happy talk about posturing and empty threats was swept aside. A full-scale, red-hot trade war was underway.

This recent outline is accurate as far as it goes. Yet it leaves out a much longer and more complicated backstory. On Dec. 11, 2001, China was formally admitted to the World Trade Organization, WTO, the legal successor to the General Agreement on Tariffs and Trade, GATT, one of the original Bretton Woods institutions from 1944.

China’s admission to the WTO was the result of years of negotiations and substantive concessions on the part of China. Despite those perceived concessions, China secretly pursued the same policy it has used at the U.N. Security Council, the IMF and other multilateral organizations it has joined in recent years.

Here’s an easy metaphor that captures Chinese behavior: Imagine you’re on the admissions committee at an exclusive club. Your club has a strict dress code that involves jackets, ties and leather shoes even on casual occasions.

A new potential member has applied. They go through the interview process, bring recommendations are informed about the dress code and agree to strict adherence. The new member is admitted. The next day the new member shows up at the bar in cutoffs, flip-flops and a T-shirt.

Your club has a problem.

China’s the same way. They go through rigorous vetting. The organization rules and procedures are carefully explained. China agrees to play by the rules and is formally admitted. The next day, China proceeds to break every rule in the book and, in effect, dares the leadership to sanction them. The sanctions never arrive.

The group has a problem.

From this perspective, the trade war did not begin in 2018; it began in 2001. It was not started by President Trump; it was started by China through rule breaking, theft of intellectual property, export dumping and slow-rolling open markets.

When China joined the WTO, its trade surplus with the U.S. was about $100 billion per year. Today China’s trade surplus with the U.S. is about $400 billion per year and rising. This surplus is in addition to the theft of over $600 billion of intellectual property. The 17-year wealth transfer from the U.S. to China now exceeds $3 trillion.

Viewed this way, Trump’s 2018 tariffs on China were not the start of a trade war. They were a desperate effort to stop one before the U.S. is looted further by the Chinese.

In the short run, China has been able to see Trump’s ante every time Trump increases tariffs. Yet China is crucially weak on this front. The U.S. imports about $500 billion per year in goods from China and exports about $100 billion to China. The difference is the $400 billion per year trade deficit the U.S. runs with China.

China is getting close to tariffs on 100% of U.S. imports. The U.S. can still impose tariffs on another $400 billion of Chinese imports. This is what Trump referred to when he said the U.S. cannot lose the trade war with China because “we already lost.”

Trump’s hope is that China will see it’s playing a losing hand, meet Trump for negotiations and settle on lower tariffs all around. This could expand bilateral trade and be a boost to the global economy.

So far, China has not sought reconciliation. Instead it has injected a currency war tactic into the trade wars to give it more leverage than would otherwise exist. Here’s a chart that shows the radical devaluation of the Chinese yuan, CNY, against the dollar, USD, in the past four months:

Chart 1

In the past four months, the Chinese yuan (CNY) has collapsed 8.5% against the U.S. dollar (USD). From 6.28 to 6.88 per dollar. This is a greater collapse than the August 2015 3% “shock” devaluation that triggered an 11% U.S. stock market collapse. This new devaluation will continue as part of China’s play in the trade wars. This time a Chinese stock collapse is a more likely result.

This currency devaluation is China’s reply to Trump. If the yuan dropped 20% against the dollar, Chinese export costs would drop by about the same amount because yuan unit labor costs are a huge part of Chinese manufacturing costs.

If Chinese export costs are $100 per unit, a 20% devaluation will lower those costs to $80 per unit. A 25% U.S. tariff on the new $80 baseline will raise the export cost to $100 — exactly where it started.

China has discovered that devaluation is a near-perfect offset to tariffs. The devaluation tactic not only lowers Chinese export costs; it increases U.S. export costs, as shown in Chart 2 below.

Chart 2

With the trade wars and currency wars now commingled, what are my predictive analytic models telling us about the prospects for Chinese stocks in particular and China more broadly?

Right now, they’re telling us that China is not backing down from its aggressive response to Trump’s tariffs. The Trump team shows no inclination to back down either. The result will be constricted bilateral trade and slower growth at the margin for both countries.

A declining Chinese stock market, as reflected in the FXI price, will be collateral damage in this escalating struggle. It’s not a result that China wants, but it’s a price they will pay in order to keep Chinese citizens employed and assembly lines humming.

Lower unit labor costs combined with higher U.S. tariffs will shift wealth from Chinese enterprises to U.S. importers, but there should be little change in the local currency earnings and job security of Chinese workers. That’s the line in the sand the Communists will defend.

The combined trade and currency wars are like a perfect storm aimed at FXI. Wall Street is misreading these developments, but you don’t have to.

]]>https://investingmatters.co.za/chinas-plan-to-tank-their-own-stock-market/feed/0StatueChart 1Chart 2167175Keep Your Eye on Chinahttps://investingmatters.co.za/keep-your-eye-on-china/#utm_source=rss&utm_medium=rss&utm_campaign=keep-your-eye-on-china
https://investingmatters.co.za/keep-your-eye-on-china/#respondTue, 14 Aug 2018 20:52:37 +0000https://investingmatters.co.za/keep-your-eye-on-china/This post Keep Your Eye on China appeared first on Daily Reckoning. The trade war is beginning to take its toll on China as the Chinese economy is losing momentum. Beijing has pledged to increase small-business lending and increase infrastructure investment to help offset the impact. Ting Lu, chief China economist at Nomura Intl. in… Read More

The trade war is beginning to take its toll on China as the Chinese economy is losing momentum. Beijing has pledged to increase small-business lending and increase infrastructure investment to help offset the impact.

Ting Lu, chief China economist at Nomura Intl. in Hong Kong, said, for example, “The Chinese economy will get worse before getting better. It takes several months to turn around. Beijing will step up credit easing and fiscal measures to deliver a recovery and prevent financial troubles such as a rise of bond defaults.”

But with a debt-to-GDP ratio of about 250%, China is already well into the danger zone. How much more debt-financed stimulus can it take?

Research by economists Kenneth Rogoff and Carmen Reinhart indicates that debt-to-GDP becomes a drag on the economy at 90%.

There are some real assets to show (their trains are the best in the world) and some growth, but not nearly enough to cover the liabilities that have been created in the form of bank deposits, corporate bonds, “wealth management products,” intercompany loans, etc.

On the other hand, China has enough in hard currency reserves to clean up the mess. China will need hard currency in addition to yuan money printing to handle the external dollar-denominated debt.

The policy issue for China, therefore, is when and how they go about the cleanup. If China moves too quickly, they risk slowing the economy, slowing job creation and delegitimizing the Communist Party.

If China waits too long, they risk an uncontrolled panic and a liquidity crisis, which can grow far worse than the initial problem through contagion. Chinese contagion also has the potential to go global.

Given this dilemma, China is trying a Goldilocks approach of not too fast and not too slow. This Goldilocks plan has three parts:

1. Keep the problem from getting worse than it already is.

2. Shut down the worst institutions in a relatively transparent “no drama” manner.

3. Play for time with regard to the rest of the financial system and try to grow out of the problem.

Will China be able to pull off this Goldilocks approach to a potential credit crisis? Of course not. Nobody’s that good or that lucky. Still, the Communists will try and may be able to keep the greatest Ponzi scheme in history afloat in China for another year or so.

The endgame is still a financial crisis that the Chinese won’t see coming. In that case, China’s only solutions are to close the capital account, devalue the currency, nationalize the financial sector and put the malefactors in jail.

This story is getting worse because of the escalating trade war that shows no signs of letting up. On top of it we now must add an emerging-markets crisis as the crisis in Turkey threatens a spillover.

The problem here is contagion. History shows that once a single nation defaults, creditors lose confidence in other emerging markets. Those creditors begin to cash out investments in EMs across the board and a panic begins.

Once that happens, even the stronger countries such as China lose reserves rapidly and end up in default. In a worst case, a full-scale global liquidity crisis could commence, which would be worse than 2008.

I’ll be keeping a close eye on the situation.

Add it all up and the Chinese financial sector is caught in a vise. The result could very well be a financial meltdown of unprecedented magnitude in China with the potential to go global and cause a market collapse in Europe and the U.S. as well.

In one version of the old Goldilocks fairy tale, she is almost eaten by the three bears but manages to escape the cottage and run into the woods.

]]>https://investingmatters.co.za/keep-your-eye-on-china/feed/0167177The Internet Just Crowd-funded The Release Of 4,358 CIA Mind-Control Documentshttps://investingmatters.co.za/the-internet-just-crowd-funded-the-release-of-4358-cia-mind-control-documents/#utm_source=rss&utm_medium=rss&utm_campaign=the-internet-just-crowd-funded-the-release-of-4358-cia-mind-control-documents
https://investingmatters.co.za/the-internet-just-crowd-funded-the-release-of-4358-cia-mind-control-documents/#respondTue, 14 Aug 2018 20:50:19 +0000https://investingmatters.co.za/the-internet-just-crowd-funded-the-release-of-4358-cia-mind-control-documents/Via TheAntiMedia.com, A crowdfunding campaign has succeeded in raising the funds necessary to pay a Freedom of Information Act request fee for documents related to the CIA’s controversial MKUltra program. John Greenewald of Black Vault, a website that publishes government documents, appealed to the internet for help after the agency refused to waive the $425 fee it… Read More

A crowdfunding campaign has succeeded in raising the funds necessary to pay a Freedom of Information Act request fee for documents related to the CIA’s controversial MKUltra program.

John Greenewald of Black Vault, a website that publishes government documents, appealed to the internet for help after the agency refused to waive the $425 fee it was demanding to release the documents. Greenewald, who has been filing FOIA requests for two decades, had previously published files on MKUltra, a program best known for dosing individuals with drugs like LSD to research mind control.

Wikipedia explains MKULTRA as the following:

Project MKUltra – sometimes referred to as the CIA’s mind control program – was the code name given to an illegal program of experiments on human subjects, designed and undertaken by the United States Central Intelligence Agency (CIA). Experiments on humans were intended to identify and develop drugs, alcohol, stick and poke tattoos, and procedures to be used in interrogations and torture, in order to weaken the individual to force confessions through mind control. Organized through the Scientific Intelligence Division of the CIA, the project coordinated with the Special Operations Division of the U.S. Army’s Chemical Corps. The program began in the early 1950s, was officially sanctioned in 1953, was reduced in scope in 1964, further curtailed in 1967 and officially halted in 1973. The program engaged in many illegal activities; in particular it used unwitting U.S. and Canadian citizens as its test subjects, which led to controversy regarding its legitimacy. MKUltra used numerous methodologies to manipulate people’s mental states and alter brain functions, including the surreptitious administration of drugs (especially LSD) and other chemicals, hypnosis, sensory deprivation, isolation, verbal and sexual abuse, as well as various forms of torture.

The scope of Project MKUltra was broad, with research undertaken at 80 institutions, including 44 colleges and universities, as well as hospitals, prisons, and pharmaceutical companies. The CIA operated through these institutions using front organizations, although sometimes top officials at these institutions were aware of the CIA’s involvement. As the US Supreme Court later noted, MKULTRA was:

concerned with “the research and development of chemical, biological, and radiological materials capable of employment in clandestine operations to control human behavior.” The program consisted of some 149 subprojects which the Agency contracted out to various universities, research foundations, and similar institutions. At least 80 institutions and 185 private researchers participated. Because the Agency funded MKUltra indirectly, many of the participating individuals were unaware that they were dealing with the Agency.

Project MKUltra was first brought to public attention in 1975 by the Church Committee of the U.S. Congress, and a Gerald Ford commission to investigate CIA activities within the United States. Investigative efforts were hampered by the fact that CIA Director Richard Helms ordered all MKUltra files destroyed in 1973; the Church Committee and Rockefeller Commission investigations relied on the sworn testimony of direct participants and on the relatively small number of documents that survived Helms’ destruction order.

In 1977, a Freedom of Information Act request uncovered a cache of 20,000 documents relating to project MKUltra, which led to Senate hearings later that same year. In July 2001, some surviving information regarding MKUltra was declassified.

The program was shut down, and the documents were reportedly destroyed in 1973 at the order of then-director Richard Helms, but some were eventually released.

Greenewald filed his first request for the documents in the late ‘90s and says he didn’t hear back for years. In 2004, the CIA released some relevant documents to him via CD-Rom, which he published, but years later, he discovered thousands of pages were missing.

“So, even though I paid for the CDs already, and they gave me an index originally stating that 100% of those records were on the CD-ROMs, they in fact, were not,” he said in his GoFundMe appeal. He filed a new request but the CIA is charging him $425 to print 4,358 pages of previously withheld material. He easily met his goal of $500 (to cover any additional costs and GoFundMe fees) with the help of just 16 donors.

MKUltra has been extensively verified – in one case, the CIA kept seven prisoners at a Kentucky penitentiary high on acid for 77 days – but many of the documents are not available to the public. Though the CIA claims the documents he is requesting are not related to MKUltra, and rather, pertain to “behavioral modification,” Greenewald isn’t convinced. “Whether or not that ties into MKUltra and mind control, which I believe it does, the CIA claims it does not,” he toldVice News.

“To me, even though the government lies, documents do not,” Greenewald said.

]]>https://investingmatters.co.za/the-internet-just-crowd-funded-the-release-of-4358-cia-mind-control-documents/feed/0167183Gold stocks are not too oversold yethttps://investingmatters.co.za/gold-stocks-are-not-too-oversold-yet-2/#utm_source=rss&utm_medium=rss&utm_campaign=gold-stocks-are-not-too-oversold-yet-2
https://investingmatters.co.za/gold-stocks-are-not-too-oversold-yet-2/#respondTue, 14 Aug 2018 20:38:44 +0000https://investingmatters.co.za/gold-stocks-are-not-too-oversold-yet-2/In recent days Gold has been more oversold than the gold stocks. Entering this week, the gold stocks were fresh off a major technical breakdown. An upside or downside break can lead to a market stretching beyond what typically qualifies as overbought or oversold. After Monday’s selloff, the gold stocks are hitting oversold levels but… Read More

]]>In recent days Gold has been more oversold than the gold stocks. Entering this week, the gold stocks were fresh off a major technical breakdown. An upside or downside break can lead to a market stretching beyond what typically qualifies as overbought or oversold. After Monday’s selloff, the gold stocks are hitting oversold levels but have more to go before reaching true oversold extremes.

Below we plot GDX along with the bullish percentage index (BPI), a breadth indicator, and new highs less new lows expressed as a percentage. The BPI declined to 26.7%. That remains well above its major lows of the past five years. New highs less new lows hit -33% Monday. That is close to an oversold extreme, which we would consider anything surpassing -40%.

GDX closed just a hair under $20.00 and does not have strong support until the December 2016 lows in the high $18s.

Next we plot GDXJ along with some custom breadth indicators. Those indicators show the percentage of stocks within a 55-stock basket that closed above their 20-day, 50-day and 200-day moving averages. While these figures tumbled on Monday, they have yet to hit extremes. For example, 19% of the basket closed above its 20-dma. Most lows occur below 10%. The other two are closing in on oversold extremes but are not quite there yet.

GDXJ closed Monday at a new 52-week low and a new 18-month low. It would need to fall another 6% to test strong support around its December 2016 low.

Monday’s decline in the gold stocks has moved the sector into oversold territory. Another day or two of a similar decline would likely put the various breadth indicators into extremely oversold territory. Within the context of a significant technical breakdown and a primary downtrend, one should wait for oversold extremes before turning bullish or covering shorts. We informed subscribers Sunday that we will take profits on our large short positions as GDX and GDXJ approach their December 2016 lows.

]]>WTI continued in its rangebound mode (slightly weaker into tonight’s print) but slumped back below $67 tonight after API reported a surprise crude build.

API

Crude +3.66mm (-2.5mm exp)

Cushing +1.64mm (+500k exp)

Gasoline _1/56mm

Distillates +1.94mm

The last few weeks have seen crude inventories flip-flopping between draws and builds with a big surprise gasoline build last week. And API continued the trend with a surprise crude build (and surprise Cushing build)…

“Nobody wants to go home long” when forecasts are pointing to a bearish inventory report, said Bob Yawger, director of futures division at Mizuho Securities USA LLC.

WTI ended the day unchanged, fading into the print, but spiked lower as API reported the surprise crude build…

Finally, we note that Permian pipeline premia crashed back to cycle wides after a brief bounce…

]]>https://investingmatters.co.za/wti-dives-back-below-67-after-surprise-crude-build/feed/0167169Antifa, Democratic Socialists, & New World Order All Want Same Thing: "No Borders, No Wall, No USA At All"https://investingmatters.co.za/antifa-democratic-socialists-new-world-order-all-want-same-thing-no-borders-no-wall-no-usa-at-all/#utm_source=rss&utm_medium=rss&utm_campaign=antifa-democratic-socialists-new-world-order-all-want-same-thing-no-borders-no-wall-no-usa-at-all
https://investingmatters.co.za/antifa-democratic-socialists-new-world-order-all-want-same-thing-no-borders-no-wall-no-usa-at-all/#respondTue, 14 Aug 2018 20:25:00 +0000https://investingmatters.co.za/antifa-democratic-socialists-new-world-order-all-want-same-thing-no-borders-no-wall-no-usa-at-all/Authored by Michael Snyder via The American Dream blog, No matter how globalism is repackaged, it always smells the same way in the end. For decades, the globalists have subtly (or sometimes not so subtly) been moving us toward a world in which national borders have essentially been made meaningless. The ultimate goal, of course,… Read More

No matter how globalism is repackaged, it always smells the same way in the end.

For decades, the globalists have subtly (or sometimes not so subtly) been moving us toward a world in which national borders have essentially been made meaningless. The ultimate goal, of course, is to merge all the nations of the world into a “one world socialist utopia” with a global government, a global economic system and even a global religion. The European Union is a model for what the elite hope to achieve eventually on a global scale. The individual nations still exist, but once inside the European Union you can travel wherever you want, economic rules have been standardized across the Union, and European institutions now have far more power than the national governments. Liberty and freedom have been greatly restricted for the “common good”, and a giant horde of nameless, faceless bureaucrats constantly micromanages the details of daily life down to the finest details. With each passing day the EU becomes more Orwellian in nature, and that is why so many in Europe are completely fed up with it.

Unfortunately, this is precisely what Antifa, the Democratic Socialists and others on the radical left want to bring to America.

Our high schools and colleges have become hotbeds for “progressive” beliefs, and they are producing millions of young people that have completely and utterly bought into the globalist program. A lot of older Americans simply do not understand that many of these young people want to do away with the United States entirely. To many of us, such a notion is unthinkable, but the idea that the U.S. Constitution and the U.S. government should be done away with is really starting to catch fire among certain circles.

Antifa and other left-wing groups gathered at Freedom Plaza in downtown Washington, DC, on Sunday carrying signs that reveal one message loud and clear: Remove racist President Donald Trump and Vice President Mike Pence from office and overthrow the United States government.

You can see some of the protest signs that demonstrators were displaying right here.

Of course Antifa represents a relatively small (but growing) portion of the overall population.

But a movement that represents a whole lot more people is the Democratic Socialists. Thanks to her recent stunning victory in New York, Alexandria Ocasio-Cortez has become their new standard-bearer, and she is publicly calling for the abolition of ICE…

Democratic New York congressional candidate Alexandria Ocasio-Cortez explained her belief that abolishing the Immigration Customs Enforcement (ICE) agency is “common sense” during an interview on CNN with John Berman on Thursday morning.

“I think now, we’re starting to realize that ICE — part of that suite of legislation has a structure that allows for civil rights and human rights abuses,” Ocasio-Cortez stated. “And, you know, it may seem like a radical position, but I actually think it is very, very common sense. You know, we should not be separating children from their families.”

But if we don’t have anyone enforcing or protecting our borders, then it would essentially mean that we don’t have any borders at all, and that is precisely what they want.

For Democratic socialists like Ocasio-Cortez, a lack of money is never a concern. They believe that we can completely open up our borders and allow millions upon millions of new immigrants to come pouring in, and that we can also afford to provide free healthcare, free college education, free basic housing and a whole host of other social benefits to them and to everyone else that is already living here.

I know all of this sounds crazy, but this is what they want, and they are passionate about getting it.

Today, the radical left completely dominates our system of public education, and that is why so many of our young people have become radical leftists. And many of these “true believers” openly talk about a “revolution” in the United States.

Instead, they want a world that they can “transform” into their own image. They want a world where free speech is highly censored on the Internet, where your money is taken and “redistributed” to someone else, and where even the smallest details of your daily life are micromanaged “for the good of humanity”.

Ultimately, what they crave is tyranny.

They better be careful what they wish for, because someday they might end up getting it.

]]>https://investingmatters.co.za/antifa-democratic-socialists-new-world-order-all-want-same-thing-no-borders-no-wall-no-usa-at-all/feed/0167171Pure Corruptionhttps://investingmatters.co.za/pure-corruption/#utm_source=rss&utm_medium=rss&utm_campaign=pure-corruption
https://investingmatters.co.za/pure-corruption/#respondTue, 14 Aug 2018 20:17:57 +0000https://investingmatters.co.za/pure-corruption/In December 1999, Princeton Professor Ben S. Bernanke wrote a relatively obscure paper largely denouncing the Bank of Japan’s shyness. Japan’s economy had by then been mired in its first Lost Decade, one which at that moment not everyone was sure should have been lost. It was fashionable at the time to pile on the… Read More

In December 1999, Princeton Professor Ben S. Bernanke wrote a relatively obscure paper largely denouncing the Bank of Japan’s shyness. Japan’s economy had by then been mired in its first Lost Decade, one which at that moment not everyone was sure should have been lost. It was fashionable at the time to pile on the BoJ.

Japan is not in a Great Depression by any means, but its economy has operated below potential for nearly a decade. Nor is it by any means clear that recovery is imminent. Policy options exist that could greatly reduce these losses. Why isn’t more happening? To this outsider, at least, Japanese monetary policy seems paralyzed, with a paralysis that is largely self-induced. Most striking is the apparent unwillingness of the monetary authorities to experiment, to try anything that isn’t absolutely guaranteed to work. [emphasis added]

His larger point was valid, and poignant. In Japan’s case, as anyone’s might be in the same situation, there should be no stone left unturned when confronted by such a substantial break in economic function. A dislocation of that magnitude, meaning length of time if not depths to some 1930’s trough, demands emergency thinking rather than stolid patience almost to the point of indifference.

To be so relatively passive would be a crime, especially if the results were to be losing a decade of actual economic sufficiency. Dr. Bernanke argued for thinking way outside the box, for what else would be demanded by this sort of situation?

Federal Reserve Chairman Bernanke, however, was apparently unimpressed by his earlier urgency. I wrote just a few short weeks ago that though the Bank of Japan was run by clowns, I’d prefer the clowns every time to the corruption that has so thoroughly inundated “our” central bank.

You see, the Japanese at least acknowledge their problem, meaning that they still have one. Western Economists have taken a far darker path, one begun under the self-induced paralysis of one Ben Bernanke. They haven’t made recovery so much as erase the problem from the official canon.

The CBO has released its latest estimates for economic potential, and therefore what might remain of what economists call the “output gap.” This concept governs a lot of what central banks do, when or how they do it.

A recession is supposed to be nothing more than a temporary break from trend, otherwise known as potential. Modern monetary policy is supposed to be a tool in ensuring the gap remains both small and short-lived. The end result is recovery, or the point at which actual output is equal again to potential; the output gap falls to zero.

What Bernanke was writing about in 1999 was Japan’s experience where the output gap simply refused to disappear no matter what anyone did, fiscal or monetary. To the former Bernanke, this should have led the Bank of Japan toward more radical solutions. The most radical of all would have been to completely rethink the modern money system and the central bank’s actual role in it (not much of one), which might have been on the table had central bankers any real incentive to think freely.

According to the updated CBO numbers, the US is not Japan. The output gap by these calculations has been fully digested in Q2 2018. From here on, over the next several years, the CBO figures Jay Powell is right to be “raising rates” since the output gap will have reversed; meaning that the economy should operate above potential for the first time in a very long time, raising the risks, as Economics sees them, for inflation.

Again, this is a thoroughly corrupt view. Recovery hasn’t happened because output remains on the same lower basis that has plagued the global system since 2007. Rather, recovery is being calculated on a very different basis that adds up instead to where it can’t actually happen – the very thing ’99 Bernanke declared as dangerous and unworthy self-paralysis.

For one thing, this recovery is quite unexpected. At every prior juncture, those older calculations expected the output gap would have remained substantial if GDP today were as low as it has been. In other words, using older estimates of potential we can see that by those standards there isn’t a recovery today.

Only by reducing and then reducing some more estimates on potential has the CBO been able to even suggest Jay Powell, as Janet Yellen, as Ben Bernanke, has been something other than paralyzed. This should never be acceptable. But now that the shoe is on the other foot, suddenly it is.

Using January 2007’s figures on potential, the output gap today wouldn’t be anything other than enormous. In fact, according to this track the gap in 2018 is substantially larger than it was at the worst point of the Great “Recession” in 2009. The economy got worse over the last decade, not at all better.

A few years later, after having then been confronted by the size and duration of the contraction, driven by a monetary panic, no less, the CBO began to adjust its trend numbers but still in 2010 was expecting something like the prior pre-crisis potential to eventually materialize. Under these estimates, the current measure of output is still a little further behind than in 2009.

Even by 2014, after suffering a false dawn and then a major “unexpected” worldwide slowdown, the CBO continued to expect a considerably greater trend for the US economy. By these estimates, the output gap in Q2 2018 would still be an unusually unhealthy 5% not 0%. That was a mere four years ago. If you have so much trouble coming up with consistent trend and potential estimates, maybe you’re doing them wrong?

In short, the CBO cannot say why economic potential has been so drastically demoted over the years. All they do know is that the economy has never lived up to even those lesser numbers, exactly the same problem Professor Bernanke urged monetary officials to become aggressive about. The economy never performs, so it must be healed? No way.

In other words, central bankers have a sacred duty to the public to do something about it until it does actually live up to some reasonable standard. If their experiments fail, then they shouldn’t just give up and rewrite economic history. Rather, they might instead begin to look for the problem in the one place they might otherwise refuse. The mirror.

That’s ultimately where Bernanke’s prior thinking would have taken him, if for one second he had ever considered Economists especially those at central banks really don’t know what they are doing. The rest of us are under no such religious-like oath or constraint. We don’t have to accept an output gap that nobody, especially markets (curves), believes has disappeared.

Let’s rewrite Bernanke’s 1999 central bank creed:

Why isn’t more happening? To this outsider, at least, US monetary policy seems paralyzed, with a paralysis that is largely self-induced. Most striking is the apparent unwillingness of the monetary authorities to accept reality, to believe there remains as big a problem today as when first confronted with it a decade ago. That starts with examining down to the very fundamental level what central bankers know, and don’t know, about economy, finance, and especially monetary operation.

Yeah, it’s much easier and less prone to spark uncomfortable questions to just rewrite potential so as to mechanically erase the output gap rather than honestly search for the way back toward a real recovery. Pure, unforgivable corruption.

]]>https://investingmatters.co.za/pure-corruption/feed/0167165Dead. Cat. Bounce..?https://investingmatters.co.za/dead-cat-bounce/#utm_source=rss&utm_medium=rss&utm_campaign=dead-cat-bounce
https://investingmatters.co.za/dead-cat-bounce/#respondTue, 14 Aug 2018 20:01:35 +0000https://investingmatters.co.za/dead-cat-bounce/This… Emerging Market FX rallied broadly on the day (after the biggest 4 day drawdown since Lehman) – its best day in three weeks… The Argentine Peso slipped lower in the late day… Of course, all eyes were on the Lira as it rallied back up to unchanged from Friday’s close… After its… Read More

]]>https://investingmatters.co.za/dead-cat-bounce/feed/0167159Three Ways to Beat the Gold Bear Markethttps://investingmatters.co.za/three-ways-to-beat-the-gold-bear-market/#utm_source=rss&utm_medium=rss&utm_campaign=three-ways-to-beat-the-gold-bear-market
https://investingmatters.co.za/three-ways-to-beat-the-gold-bear-market/#respondTue, 14 Aug 2018 20:00:28 +0000https://investingmatters.co.za/three-ways-to-beat-the-gold-bear-market/Justin’s note: As longtime readers know, we recommend owning physical gold for the long term… and gold stocks for their huge upside potential. And while gold’s been stuck in a bear market this year, you should still be preparing for the next boom. Today, Palm Beach Daily analyst Nick Rokke explains why—and shares three ways… Read More

]]>Justin’s note: As longtime readers know, we recommend owning physical gold for the long term… and gold stocks for their huge upside potential.

And while gold’s been stuck in a bear market this year, you should still be preparing for the next boom. Today, Palm Beach Daily analyst Nick Rokke explains why—and shares three ways to position yourself when the trends change course.

By Nick Rokke, analyst, The Palm Beach Daily

“It’s a tough time to be a miner.”

That’s the message many CEOs had for attendees of the annual Sprott Natural Resource Symposium…

I attended the symposium in Vancouver last month. It’s the world’s premier natural resource conference. There were well over 100 speakers and companies presenting, and hundreds more were in attendance.

But the mood was gloomy. Most commodities topped out in 2011… They’ve been down since.

The chart above shows the SPDR S&P Metals and Mining ETF (XME), which holds a basket of mining companies.

As a whole, miners have lost 55% of their money over the last seven years. It’s no wonder these guys are feeling down in the dumps.

These are companies that finance mining projects, and in return, receive royalties from all the gold, silver, or whatever else they produce.

Franco-Nevada is the largest royalty company in the space, and it has weathered the bear market well. In fact, it’s up 77% since September 2011.

Other royalty companies include Wheaton Precious Metals, Osisko Gold Royalties, and Royal Gold.

• “Picks-and-shovels” companies

These companies make mining equipment.

They don’t have to rely on finding major discoveries like mining companies do. They make money by selling the supplies necessary to hit these jackpots.

A major company in this space is Caterpillar, likely the world’s largest supplier of mining equipment. It is far from a pure play on the mining sector, though. Caterpillar also makes construction, oil drilling, and transportation equipment.

Ritchie Bros. Auctioneers is another picks-and-shovels play… The company auctions mining equipment. If this downtrend continues, more companies will need to quickly sell equipment to survive.

• Companies run by legends

Look for management teams led by people who have been through a few of these boom-and-bust cycles… They know what it takes to survive the downturn.

It’s also nice to know if the people leading the company have become wealthy from the mining space.

During the “Legends of the Mining Industry” panel at the Sprott conference, mining tycoon Ross Beaty said he’s willing to put another $500 million into his companies—if needed.

Beaty should know a thing or two about mining. He’s spent almost 40 years in the industry. Since 1985, he’s founded and sold several resource companies. Today, he runs Pan American Silver and Equinox Gold.

Beaty is buying projects now to start mining when the tides turn. He plans on making a fortune doing this… You should ride his coattails.

Bringing It All Together

Those are the three spots I’m looking to start a position in. If there’s a further pullback in gold, I’ll add a little more to my positions.

Like I said, the turnaround in commodities could happen soon… or it might not happen for a while. But I want you to be positioned for when it does… because these types of companies have the ability to multiply your money.

Now, some of these companies are small—and can be volatile. As always, do your homework and research each company. And never risk more than you can afford to lose.

Regards,

Nick Rokke
Analyst, The Palm Beach Daily

Justin’s note: I recommend signing up for Dave Forest’s International Speculator newsletter for the highest potential gold stocks today. His portfolio is filled with the top names in the space… And they’re primed to rip higher when the gold market rebounds.

You can learn more about his letter—and one of his top money-making ideas right now—by clicking here.

Reader Mailbag

Which justice system are we talking about? The one that applies to the political and financial “elites” and high-profile Democrats (like, for example, Jon Corzine and Hillary Clinton) or the one that applies to all the rest of us?

—Matt

Got to agree with Doug, to the average person the legal system seems arbitrary and something to be avoided. Clearly it is corrupt and political, lacking any semblance of justice. The fact that Hillary and Bill are still walking around loose is all the proof I need of this.

—Joseph

As always, if you have any questions or suggestions for the Dispatch, send them to us right here.

]]>https://investingmatters.co.za/three-ways-to-beat-the-gold-bear-market/feed/0167157It's Time for Contrarians to Get Bullish on Goldhttps://investingmatters.co.za/its-time-for-contrarians-to-get-bullish-on-gold/#utm_source=rss&utm_medium=rss&utm_campaign=its-time-for-contrarians-to-get-bullish-on-gold
https://investingmatters.co.za/its-time-for-contrarians-to-get-bullish-on-gold/#respondTue, 14 Aug 2018 20:00:00 +0000https://investingmatters.co.za/its-time-for-contrarians-to-get-bullish-on-gold/Gold can’t seem to catch a break. The yellow metal normally acts as a safe haven in times of political and economic strife, but in the face of Turkey’s lira meltdown, investors have taken cover instead in the U.S. dollar. On Monday, the stronger greenback pushed gold to end below $1,200 an ounce for the… Read More

Gold can’t seem to catch a break. The yellow metal normally acts as a safe haven in times of political and economic strife, but in the face of Turkey’s lira meltdown, investors have taken cover instead in the U.S. dollar. On Monday, the stronger greenback pushed gold to end below $1,200 an ounce for the first time since January 2017.

The lira fell to its lowest level ever recorded against the dollar Monday, mainly in response to President Donald Trump’s call to sanction and double steel and aluminum tariffs on Turkey. This sent gold priced in Turkey’s currency to all-time highs. If you recall, we saw the same thing happen recently in Venezuela, where inflation is expected to hit 1 million percent by the end of the year.

Turkey’s faith in gold was on full display this week as President Recep Erdogan urged his fellow Turks to convert their gold and hard currencies into lira in an effort to prop up the country’s hammered currency. The same strategy was used in December 2016, a month after Trump’s election sent the lira tumbling against the dollar.

The Love Trade Is Strong in Turkey

As I’ve discussed before, Turkey has a long and rich history with gold. Home to the world’s very first gold coins more than 2,500 years ago, Turkey still stands as one of the largest buyers of the yellow metal. In the June quarter, the Eurasian country was the fourth largest consumer of gold jewelry, following India, China and the U.S. Twelve and a half metric tons were purchased in the three-month period, up 13 percent from the same time a year ago.

Along with Russia and Kazakhstan, Turkey also continues to add to its official gold holdings. Its central bank’s net purchases in the first half of the year totaled 38.1 metric tons, up 82 percent from the same six-month period in 2017, according to the World Gold Council (WGC). This made it the second highest buyer, after Russia.

Time to Get Contrarian

Gold investors might be discouraged by its performance this year, compounded by news that hedge funds are shorting the metal in record numbers. A lot of this has to do with the fact that, so far this year, gold has had a very high negative correlation to the U.S. dollar—more precisely, a negative 0.95 correlation coefficient, according to gold research firm Murenbeeld & Co. What this means is that gold prices have been moving in nearly the exact opposite direction as the greenback.

I think it’s important to point out that, despite a stronger dollar, gold is still up for the 36-month period—and climbing even higher over the long term. The dollar has only recently broken even, whereas gold has continued to hit higher lows since its phenomenal breakout in December 2015.

The dollar could be ready to peak, with the potential for even higher gold prices. The metal is currently down two standard deviations over the past 60 trading days, so the math is currently in our favor for gold to rally.

Vanguard Just Gave Precious Metal Investors the Short Shrift

There’s another sign that gold has found a bottom.

Last week, I spoke with Kitco’s Daniela Cambone about Vanguard’s decision to change its Precious Metals and Mining Fund. Starting next month, the fund’s exposure to metals and mining will be dropped from 80 percent today to only 25 percent—meaning the world’s largest fund company will no longer offer investors a way to participate, should gold and precious metals rally.

This isn’t the first time Vanguard has done this to investors. Back in 2001, it removed the word “gold” from what was then the Gold and Precious Metals Fund. The change coincided with a decade-long precious metals bull run that saw gold rally from an average price of $271 an ounce in 2001 to an all-time high of more than $1,900 in September 2001. That’s more than a sevenfold increase.

And now it’s dropping the fund altogether—at a time when gold might be ready to break out.

So could this mean another bull run is in the works? No one can say for sure, of course, but the timing of Vanguard’s announcement is certainly interesting.

What I can say with certainty is that there are likely many investors in the Vanguard ecosystem who are in for a rude awakening when they find out their exposure to the metals and mining sector has inexplicably shrunk.

Fortunately, investors have other options! Learn more by clicking here!

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

The U.S. Dollar Index is an index of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners’ currencies.

Standard deviation is a quantity calculated to indicate the extent of deviation for a group as a whole.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 6/30/2018.

]]>https://investingmatters.co.za/its-time-for-contrarians-to-get-bullish-on-gold/feed/0It’s Time for Contrarians to Get Bullish on GoldTurkish lira down more than 45% for the yeardespite a stronger u.s. dollar, gold is still up for 36-month perioddoes vanguard's latest fund name change mean gold has found a bottom?167167US Household Debt Hits Record $13.3 Trillionhttps://investingmatters.co.za/us-household-debt-hits-record-13-3-trillion/#utm_source=rss&utm_medium=rss&utm_campaign=us-household-debt-hits-record-13-3-trillion
https://investingmatters.co.za/us-household-debt-hits-record-13-3-trillion/#respondTue, 14 Aug 2018 19:52:18 +0000https://investingmatters.co.za/us-household-debt-hits-record-13-3-trillion/Total household debt hit a new record high, rising by $82 billion to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier according to the NY Fed’s latest household debt report. It was the 16th consecutive quarter with an increase in household debt, and the total is now $618 billion higher than… Read More

]]>Total household debt hit a new record high, rising by $82 billion to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier according to the NY Fed’s latest household debt report. It was the 16th consecutive quarter with an increase in household debt, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Overall household debt is now 19.2% above the post-financial-crisis trough reached during the second quarter of 2013.

Mortgage balances—the largest component of household debt—rose by $60 billion during the second quarter, to $9.00 trillion. Credit card debt rose by $14 billion to $829 billion; auto loan debt increased by $9 billion in the quarter to $1.24 trillion and student loan debt hit a record high of $1.41 trillion, an increase of $2 billion in Q2.

Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $4 billion, to $432 billion. The median credit score of newly originating mortgage borrowers was roughly unchanged, at 760.

Mortgage originations edged up to $437 billion in the second quarter, from $428 billion in the first quarter. Meanwhile, mortgage delinquencies continued to improve, with 1.1% of mortgage balances 90 or more days delinquent in the second quarter, versus 1.2% in the first quarter.

Most newly originated mortgages continued went to borrowers with the highest credit scores, with 58% of new mortgages borrowed by consumers with a 760 credit score or higher.

Outstanding student loan debt was mostly unchanged in the second quarter and stood at a record $1.41 trillion as of June 30. Auto loan balances also hit an all time high, as they continued their six-year upward trend, increasing by $9 billion in the quarter, to $1.24 trillion. Meanwhile, credit card balances rose by $14 billion, or 1.7%, after a seasonal decline in the first quarter, to $829 billion.

Despite rising interest rates, credit card delinquency rates eased slightly, with 7.9% of balances 90 or more days delinquent as of June 30, versus 8.0% at March 31. The share of consumers with an account in collections fell 23.4% between the third quarter of 2017 and the second quarter of 2018, from 12.3% to 9.4%, due to changes in reporting requirements of collections agencies.

Meanwhile student loan delinquencies remain stubbornly just above 10%, a level they hit 6 years ago and have failed to move in either direction.

In some good news for the student loan debt seriously delinquent student loans, those 90 days or more behind, declined in the second quarter to 8.6% from 8.9% in the prior quarter.

“Aggregate household debt grew for the 16th consecutive quarter in the second quarter of 2018,” said Wilbert van der Klaauw, New York Fed senior vice president.

“While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans.”

]]>https://investingmatters.co.za/us-household-debt-hits-record-13-3-trillion/feed/0167161The Mission of the Mises Institute, In One Paragraphhttps://investingmatters.co.za/the-mission-of-the-mises-institute-in-one-paragraph/#utm_source=rss&utm_medium=rss&utm_campaign=the-mission-of-the-mises-institute-in-one-paragraph
https://investingmatters.co.za/the-mission-of-the-mises-institute-in-one-paragraph/#respondTue, 14 Aug 2018 19:45:00 +0000https://investingmatters.co.za/the-mission-of-the-mises-institute-in-one-paragraph/By: Jeff Deist The mission of the Mises Institute, as presaged by Ludwig von Mises in his 1962 review of Murray Rothbard’s Man, Economy, and State: If we want to avoid the destruction of Western civilization and the relapse into primitive wretchedness, we must change the mentality of our fellow citizens. We must make them realize what… Read More

The mission of the Mises Institute, as presaged by Ludwig von Mises in his 1962 review of Murray Rothbard’s Man, Economy, and State:

If we want to avoid the destruction of Western civilization and the relapse into primitive wretchedness, we must change the mentality of our fellow citizens. We must make them realize what they owe to the much vilified “economic freedom,” the system of free enterprise and capitalism. The intellectuals and those who call themselves educated must use their superior cognitive faculties and power of reasoning for the refutation of erroneous ideas about social, political and economic problems and for the dissemination of a correct grasp of the operation of the market economy. They must start by familiarizing themselves with all the issues involved in order to teach those who are blinded by ignorance and emotions. They must learn in order to acquire the ability to enlighten the misguided many.

The entire review is fantastic, and demonstrates the degree to which Mises considered the young Rothbard an eminent and pioneering economist– nothing less than an “epochal” contributor to the science of praxeology. High praise indeed.

]]>https://investingmatters.co.za/the-mission-of-the-mises-institute-in-one-paragraph/feed/0167174Mark Thornton Joins the Tom Wood Show to Discuss The Skyscraper Cursehttps://investingmatters.co.za/mark-thornton-joins-the-tom-wood-show-to-discuss-the-skyscraper-curse/#utm_source=rss&utm_medium=rss&utm_campaign=mark-thornton-joins-the-tom-wood-show-to-discuss-the-skyscraper-curse
https://investingmatters.co.za/mark-thornton-joins-the-tom-wood-show-to-discuss-the-skyscraper-curse/#respondTue, 14 Aug 2018 19:45:00 +0000https://investingmatters.co.za/mark-thornton-joins-the-tom-wood-show-to-discuss-the-skyscraper-curse/By: Mark Thornton, Thomas E. Woods, Jr. Recently Mark Thornton joined the Tom Woods Show to discuss his new book The Skyscraper Curse, and How Austrian Economists Predicted Every Major Economic Crisis of the Last Century. Download the show here. Source: mises.org/power-market

]]>https://investingmatters.co.za/mark-thornton-joins-the-tom-wood-show-to-discuss-the-skyscraper-curse/feed/0Skyscraper Curse_Thornton_750x516_20180810_0.png167173Colorado School District Cancels Monday Classes In Effort To Boost Teacher Moralehttps://investingmatters.co.za/colorado-school-district-cancels-monday-classes-in-effort-to-boost-teacher-morale/#utm_source=rss&utm_medium=rss&utm_campaign=colorado-school-district-cancels-monday-classes-in-effort-to-boost-teacher-morale
https://investingmatters.co.za/colorado-school-district-cancels-monday-classes-in-effort-to-boost-teacher-morale/#respondTue, 14 Aug 2018 19:35:58 +0000https://investingmatters.co.za/colorado-school-district-cancels-monday-classes-in-effort-to-boost-teacher-morale/Authored by Andrew Kerr via The Daily Caller, A Colorado school district announced Monday it will move to a four-day school week for the upcoming calendar year. Colorado School District 27J, which serves 18,000 students in the Denver metropolitan area, hopes that nixing Monday classes will save the district around $1 million in transportation, utilities… Read More

A Colorado school district announced Monday it will move to a four-day school week for the upcoming calendar year.

Colorado School District 27J, which serves 18,000 students in the Denver metropolitan area, hopes that nixing Monday classes will save the district around $1 million in transportation, utilities and substitute teacher costs, as well as providing a boost to student and teacher morale.

The schedule change means that students will only be in class for 149 days, according to the district’s calendar, far fewer than the 180-day school year typically required by public schools in most states.

Fielder told parents in February the district will accommodate for lost classroom time by extending school hours on the days class is in session.

The school district saw a surge of applicants wanting to teach at its schools in April by teachers enticed by the prospect of a four-day work week. Summer vacation for all of June and July for teachers and students appears to be untouched by the change, according to the district calendar.

“Who doesn’t want that?” one applicant told KUSA in April. “I really think what 27J is doing is going to be so helpful. It’s going to be great and I just think the kids are going to love it.”

Fielder said teachers will only have to work one Monday a month, for only half a day.

“We really feel like Monday is the day to prepare and to be better for kids,” he said. “This will give people a chance to have a weekend and then come in on Monday — whether they’re paid to or not because they’re doing that work anyway to be prepared for kids and to be better for kids.”

While teachers are reportedly thrilled about the change, many parents are concerned about finding and paying for child care on Mondays.

The district’s chief academic officer, Will Pierce, acknowledged in February that the transition to a four-day school week will disproportionately affect low-income families.

“I’m curious about what that off day causes,” Pierce told The Denver Post. “What if … you have two people who have to work to pay the bills? What do those kids do on Mondays?”

]]>https://investingmatters.co.za/colorado-school-district-cancels-monday-classes-in-effort-to-boost-teacher-morale/feed/0167163Ray Dalio’s Bridgewater keeps faith in gold despite its slidehttps://investingmatters.co.za/ray-dalios-bridgewater-keeps-faith-in-gold-despite-its-slide/#utm_source=rss&utm_medium=rss&utm_campaign=ray-dalios-bridgewater-keeps-faith-in-gold-despite-its-slide
https://investingmatters.co.za/ray-dalios-bridgewater-keeps-faith-in-gold-despite-its-slide/#respondTue, 14 Aug 2018 18:45:37 +0000https://investingmatters.co.za/ray-dalios-bridgewater-keeps-faith-in-gold-despite-its-slide/(Bloomberg) — Billionaire hedge-fund manager Ray Dalio maintained his holdings in the two biggest gold-backed ETFs even as an investor exodus sent prices of the metal tumbling. As of June 30, Dalio’s Bridgewater Associates maintained its 3.9 million shares in SPDR Gold Shares, the largest exchange-traded funds backed by bullion, and 11.3 million in iShares… Read More

(Bloomberg) — Billionaire hedge-fund manager Ray Dalio maintained his holdings in the two biggest gold-backed ETFs even as an investor exodus sent prices of the metal tumbling.

As of June 30, Dalio’s Bridgewater Associates maintained its 3.9 million shares in SPDR Gold Shares, the largest exchange-traded funds backed by bullion, and 11.3 million in iShares Gold Trust, the second-largest, according to a regulatory filing.

ETF investors turned sour on gold in the three months ended in June, with more than $1 billion exiting SPDR Gold and the iShares fund posting its first quarterly outflow since 2016. The flight from the funds has continued, with holdings in all bullion-backed ETFs tracked by Bloomberg shrinking to the smallest in six months.

The metal’s haven appeal waned on a strengthening dollar and a rally in equities, sending prices down 5.5 percent in the period. Robust U.S. growth bolstered the case for the Federal Reserve to keep raising borrowing costs, adding to headwinds against the non-interest-bearing asset.

No Safe Haven in Gold as Prices Sink to Lowest Since Early 2017 Dalio’s Bridgewater Boosts Gold Holdings in SPDR, IShares Dalio recommends Gold as Hedge Against Rising Political Risk.

Filings released this month don’t include hedge funds’ current position, which may have changed since the end of the quarter. Money managers who oversee more than $100 million in the U.S. must file a Form 13F within 45 days of each quarter’s end to list those stocks as well as options and convertible bonds. The filings don’t show non-U.S. securities, holdings that aren’t publicly traded, or cash.

This week, we are suspending accounts for attempting to evade an account suspension. These accounts were previously suspended for abusive behavior or evading a previous suspension, and are not allowed to continue using Twitter.

And rather than be careful in its suspension, it is relying on you to claim back your account status should you feel aggrieved…

We will continue this work in the coming weeks as we identify others who are attempting to Tweet following an account suspension. If you believe your account has been suspended in error, please let us know.https://t.co/RUWvNoQt2G

We leave it to Nigel Farage to sum things up: writing in a scathing op-ed last Tuesday, the former UKIP leader blasted that “while many on the libertarian right and within the conservative movement have their issues with Alex Jones and InfoWars, this week’s announcement by YouTube, Facebook, Apple, and Spotify represents a concerted effort of proscription and censorship that could just as soon see any of us confined to the dustbin of social media history.“

He concludes that the real interference in “US democracy” comes not from Russia, but from some of its most powerful corporations which now yield more power in some cases than the government itself:

]]>JOHANNESBURG, Aug 14 (Reuters) – South Africa mines minister said on Tuesday he was concerned by bullion miner Gold Fields’ plan to cut around 1,100 jobs without due regard to processes outlined in the Mineral and Petroleum Resources Development Act.

Mineral Resources Minister Gwede Mantashe said some companies were not meaningfully engaging with the department on their restructuring plans but “only brief us as a mere formality or tick-box exercise.”

Gold Fields said it would cut around 30 percent of its workforce at its South Deep mine, soon after Impala Platinum announced plans to slash about a third of its workforce.

]]>https://investingmatters.co.za/south-africas-mines-minister-concerned-about-gold-fields-job-cuts/feed/0167141A Bullish Bond Argument That Hides in Plain Sighthttps://investingmatters.co.za/a-bullish-bond-argument-that-hides-in-plain-sight/#utm_source=rss&utm_medium=rss&utm_campaign=a-bullish-bond-argument-that-hides-in-plain-sight
https://investingmatters.co.za/a-bullish-bond-argument-that-hides-in-plain-sight/#respondTue, 14 Aug 2018 18:19:28 +0000https://investingmatters.co.za/a-bullish-bond-argument-that-hides-in-plain-sight/It’s been awhile since I advised anyone to load up on long Treasuries. The bearish bond narrative has been too strong for that, thanks largely to fiscal policy but also to near-4% unemployment rates, quantitative tightening and—maybe most threatening of all—tit-for-tat tariffs. In fact, I challenge anyone to think of a time during the past… Read More

It’s been awhile since I advised anyone to load up on long Treasuries. The bearish bond narrative has been too strong for that, thanks largely to fiscal policy but also to near-4% unemployment rates, quantitative tightening and—maybe most threatening of all—tit-for-tat tariffs.

In fact, I challenge anyone to think of a time during the past two decades when bond bears (read: most mainstream commentators) have possessed a more compelling Powerpoint pack.

But maybe the powerful bear story has become overplayed, maybe it was fully or almost fully priced in by mid-May, when the 10-year Treasury yield reached a six-year high of 3.11%. If so, it might be a good time to revisit the argument that the secular bull is still intact, a time for contrarians to speak up.

If that’s what you’re expecting, though, this article might disappoint you. Yes, I’ll make a bullish argument, but it won’t be contrarian. Instead, we’ll consider how you might become a bond bull by embracing the financial mainstream. We’ll explore the inner bull that’s infecting the mainstream bear with a viral case of bond optimism.

To deliver on that promise, I’ll rely on three branches of consensus thinking: the first looks at the yield curve, the second at consensus business cycle forecasts, and the third ties in consensus policy forecasts.

Inverting the Yield Curve Inversion Story

You may have already heard this shock news bulletin: Some analysts connect a flattening yield curve to recession risks. (Gasp!)

In my own reading this year, I’ve seen a few (hundred) articles on this topic. As of late April, I felt the commotion was too loud for the amount of curve flattening to date, and I said as much here. I showed that the yield curve at that time was mid-cycle or even early cycle by historical standards, not late cycle.

Of course, I timed the article perfectly (if the goal is to jinx the economy)—the flattening pace accelerated a couple of weeks later. As of this writing, the curve still isn’t clearly late cycle, but we’re much closer than we were in April. So instead of tempering the mainstream view, let’s do something different—let’s embrace the view but invert it.

It’ll take a minute to explain what I mean by that. We start with the argument that inverted curves foretell recessions, but the historical support for that argument is just “okay” in my opinion. It isn’t perfect. Here are three reasons to be cautious:

Lags from curve inversions to recessions tend be long, typically between one and two years. In several cases, unrelated events that came after the inversions but before the business cycle peaks were the more obvious recession triggers, casting doubt on the importance of the inversions.

Before each of the last three recessions, the curve steepened back into a positive position after a brief inversion. At a minimum, pre-recession steepenings raise questions about the strength of any fundamentals at work.

The curve occasionally inverted as much as three or four years before a business cycle peak, as in 1965 and 1998. These are false recession signals—basically, failures.

So the yield curve might not be a slam-dunk recession predictor, after all. More realistically, it’s one of many clues that we do our best to put together in a sensible way.

But we shouldn’t limit ourselves to the traditional argument that runs from inversions to recessions, because we can draw other conclusions that fit history more precisely. For example, we can say that every time we experience a recession, we should expect to see that the yield curve inverted at an earlier point in time. That slightly different claim (basically, inverted from the traditional claim) accurately describes every business cycle from 1954 to the present, without any failures. So if you believe that inversions predict recessions, you should certainly believe that recessions imply prior inversions. And if you believe that recessions imply prior inversions, your somewhat distant business cycle forecast should be a major input to your immediate bond outlook, as I’ll demonstrate next.

The Curious Mainstream Position That Three Rights Make a Wrong

Clear as mud so far? If you haven’t already figured out where I’m going with this, the consensus business cycle outlook should make it clearer. Have a look at this chart that I reproduced from a May 2018 Wall Street Journalarticle:

The chart shows the consensus expecting a recession in 2020, which shouldn’t be surprising to readers who follow mainstream commentary. I’m proposing that we should combine the consensus recession forecast, as shown in the chart, with the consensus implications of yield curve inversions, as discussed above. With a typical 18-month lag from a curve inversion to a recession, the combination of consensus views tells us to expect an inversion at year-end 2018, prior to the expected recession in mid-2020.

In other words, the curve should invert within the next four and a half months, and if you happen to disagree with that outlook, you’re either

But we need one more piece to build a consensus bond outlook—we need to know where we should expect to find short rates at the end of the year. For that, we’ll use the 3-month Treasury bill, which some say gives us the most useful yield curve measure. Market forecasters almost uniformly expect the 3-month bill rate to jump between 30 and 50 basis points by the end of the year, which would lift it from 2.05% (last week’s close) to between 2.35% and 2.55%. We’ll roll with 2.45%, which lines up nicely with other consensus interest rate forecasts compiled by FocusEconomics.

Summarizing all three mainstream views:

A recession will occur in mid-2020.

The yield curve will invert roughly 18 months before the recession, which means by the end of 2018.

The 3-month Treasury bill will yield about 2.45% at the end of 2018.

And then putting the three views together, we should expect the 10-year Treasury to exit 2018 at a yield less than 2.45%—that’s what needs to happen for the curve to invert from the 3-month bill to the 10-year bond. For reference, the 10-year was yielding more than 3% as recently as last week.

In other words, mainstream thinking calls for an impressive bond rally during the second half of the year, and because of that outlook, it also points to a nasty identity crisis within Consensus Town.

Nonconclusions

Judging by either everyday commentary or surveys, most forecasters expect Treasury yields to climb steadily higher. (The most recent survey published by FocusEconomics pegs the year-end 10-year yield at 3.12%.) And the bearish consensus is extremely well-established—it’s been part of the landscape for most of the past two decades.

But closer analysis shows consensus to be a slippery concept. By blending the three views bulleted above, we see Treasury yields falling, not rising. That’s a bullish argument that resembles Gustavo Fring—it hides in plain sight—and it’s the crux of my article. I only need to add conclusions, but I’m honestly unsure how to do that.

On one hand, I’m not fully convinced by the views expressed in the bullets, except for the short rate view. On the other hand, I’m wholly unconvinced by the idea that bonds are on the cusp of a 1970s-style bear market, and even a mid-1990s bear seems a stretch to me—it seems like more of a worst-case trade-war scenario than anything to bet on. What’s more, I’ve been a secular bull for over 15 years now, and it’s worked well for me. Long bonds have provided a maturity premium, an additional return from rolling down the curve, a diversifier, a better match for my investment horizon and a generally downward yield trend. I’m not ready give up the horns, but I would need to write a different article to fully explain why. (Although I did discuss a few reasons here.)

So instead of segueing into an add-on article, I could go the other direction and sign off with a snappy cliché, but what would that be?

That the consensus is always wrong (one of them has to be), per the clever sayings of Mark Twain?

That the consensus is usually right (again, one of them has to be), per the insightful James Surowiecki?

That you shouldn’t mind the consensus, because you should think independently, per this essential author?

Nah, I’ll settle for this: The next time someone says, “Hey, didn’t you know everyone expects Treasury yields to soar,” answer, “Actually, most commentators expect a whopping Treasury rally before year-end, they just don’t admit it.” And then repeat my analysis and add your own conclusions.